Something significant happened at NYU Law School on 31 March 2026. David I. Miller, the newly appointed director of enforcement at the Commodity Futures Trading Commission (CFTC), delivered a pointed message to an audience of enforcement professionals, practitioners, and students: the notion that insider trading laws do not apply to prediction markets is a myth — and the CFTC intends to prove it.
According to StarCompliance, for compliance professionals working across financial institutions, hedge funds, and investment banks, this is not a problem to prepare for down the line. It is already here.
StarCompliance recently delved into why prediction markets are now becoming a compliance problem.
A clear enforcement signal
In his first public address since joining the CFTC, Miller set out the legal groundwork and the agency’s intended approach. The framework will be familiar to seasoned practitioners. The CFTC’s anti-fraud authority under the Commodity Exchange Act closely mirrors the SEC’s Rule 10b-5, and the misappropriation theory of insider trading applies when an individual trades on material nonpublic information in breach of a duty of trust. Event contracts, the CFTC maintains, fall squarely within its jurisdiction and are subject to those same provisions.
Miller was explicit: insider trading in prediction markets will be pursued, particularly where misappropriated information is involved. He was equally clear about what is not being targeted. Trading on legitimately held information remains permissible. The focus is on those who exploit confidential information obtained through their professional role or relationships.
Where risk is emerging
Miller identified three areas of particular concern. Contracts tied to individual performance or status create exposure when employees act on advance knowledge of corporate decisions, product launches, or internal developments. A recent case involving a media company employee illustrated how quickly this risk can become real.
Sports-related contracts present comparable issues. Nonpublic information about injuries, team decisions, or match outcomes can be exploited for unfair advantage, and the CFTC has already begun coordinating with professional sports leagues to monitor these risks. Government-related contracts add yet another layer. Public officials or those with access to policy decisions could face insider trading exposure if they act on information obtained through their positions — an area already attracting increased legislative attention.
Across all three categories, the common thread is consistent: misuse of material nonpublic information creates enforcement exposure regardless of the asset class.
Regulatory momentum is building
Miller’s remarks are part of a wider shift in tone from CFTC leadership. Chair Michael S. Selig has made clear that prediction markets are a priority for both enforcement and rulemaking. The agency is working to establish clearer rules, assert federal jurisdiction, and strengthen its surveillance capabilities. Coordination with the SEC is also increasing as both regulators navigate the overlap between emerging products, digital assets, and traditional financial instruments.
For firms, this creates a more complex operating environment. The regulatory boundary is still being defined — but enforcement has already begun.
The compliance gap
Despite this momentum, prediction markets remain largely absent from existing compliance frameworks. Most programmes are built around equities, fixed income, and — more recently — digital assets. Pre-clearance workflows, personal account dealing policies, and conflicts of interest frameworks do not typically account for event contracts traded on platforms such as Kalshi or Polymarket.
Firms should be asking themselves some direct questions: do existing policies capture event contract trading? Are employees with access to material nonpublic information restricted from participating in relevant contracts? Do training programmes address this risk? In many cases, the honest answer is no.
From policy to action
The path forward is not theoretical. It requires applying established principles to a new type of instrument. Firms should start by assessing whether event contracts are captured within personal trading policies and pre-clearance processes. Conflicts of interest frameworks should be reviewed to identify roles where access to sensitive information creates exposure. Training and attestation programmes should be updated accordingly, with clear guidance on what constitutes misuse of information.
Monitoring capability matters equally. As participation in prediction markets grows, firms will need systems that can incorporate these instruments into existing oversight workflows.
A practical approach
StarCompliance (Star) is already working with firms to address this challenge by extending employee compliance frameworks to cover prediction market activity. The underlying principles remain unchanged — the same expectations that govern equity trading, conflicts management, and information barriers apply here too. The difference is the instrument, not the obligation.
Firms that act now can build a defensible framework before enforcement reaches their sector. Those that delay risk being reactive when the issue has already become a regulatory concern.
Prediction markets are not a grey area awaiting new rules. They represent a new application of existing law, and regulators have made clear they are watching closely.
What firms should do now
Compliance teams should take immediate, practical steps: assess whether personal trading policies and pre-clearance processes cover event contracts; review conflicts of interest frameworks for roles with access to material nonpublic information; update training and attestation programmes to address prediction market participation; and evaluate whether existing monitoring workflows can incorporate event contracts.
Read the full StarCompliance post here.
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